Perfect Labor Storm 2.0 is a blog that highlights workforce trends, demographic shifts, and human resources changes that will change the way employers do business.

February 2009

February 28, 2009

My workforce blogging colleague Jim Kissane always comes up with interesting trends and topics. In his most recent post, he urges organizations to think twice before cutting training.

In his post he notes that "research has shown every 1.5 percent increase in the unemployment rate leads to an approximate 21 percent increase in discrimination claims, explained Shanti Atkins, president and CEO of Ethics and Legal Compliance Training (ELT)." This excerpt was retrieved from an article in Diversity Executive.

“People sue and bring claims when they feel they’ve been treated badly and when their alternatives are scarce,” she explained. “Obviously, in a bad economy when there are fewer jobs, the likelihood of you becoming a litigant is much higher because you don’t have a better-paying job to go to.”

Thus, Diversity, Sensitivity and Compliance Training may be more important than ever.

February 21, 2009

A special trustee, investigators and hundreds of reporters are delving deep into the mess that Madoff made. They all promise to unravel the genius behind the elegantly sophisticated scheme that blind-sided and essentially robbed thousands of investors and millions of their benefactors of retirement, inheritance and charity dollars. Unfortunately the fascination to understand and expose the scheme is ignoring a fundamental component of how he was able to pull it off: people.

Yes, people. What fascinates me is not so much Madoff’s genius at masterminding and sustaining his con for so long, but the utter lack of competence on the part of authorities to expose him and the enormous power of endorsement. Without the people in the SEC and other regulatory bodies doing their jobs and without people giving Madoff their money, none of his scheme was possible – or at the very minimum it would have been exposed years ago and billions of dollars earlier. So while the media, investors, and the government are fixated on finding out what he did, few people seem to be interested in the real how and why.

The how comes down to human behavior. The why relates to personal values. Without understanding the how and why, someone else is already insidiously attracting investors and followers and taking them down a very dark path.

While it is naïve to say that personality tests could be used to uncover gullible tendencies or to uncover people not competent enough to differentiate truth from fiction, the truth is they can tell a lot.

For example, let’s talk about trust. We can’t measure trust but we can measure traits that make people more trusting or skeptical. People tend to trust people like themselves.

At a very fundamental level, people tend to trust people more readily who share similar behavioral styles. People who share similar values also develop a special bond. If you then overlay these values with a tendency to be eternal optimists but lack a sense of curiosity, the susceptibility to be duped increases exponentially. Add a dash of impulsiveness to the mix and it’s easy to see how smart people can be hijacked without much effort.

Likewise individuals with a profound need to know and a bit of distrust might avoid becoming victims, not based on their intellect and wisdom but merely by personality. The highly systematic, calculating, and curious mind - the dutiful doubter - might force one to think twice or even three times before saying yes. They are thinking, "the answer is no until you can convince me otherwise."

But let’s add another layer to this. Even if you have the ‘right’ personality to make good decisions, you might not have the ability to understand and process all the information, especially if the situation is new and complicated. It’s also important to be aware about you don't know, not just accept at face value what you do know. In the Madoff case, it’s what people didn’t know that got them caught in his web.

Even more powerful than behavior and personality is values. One way to think about values is in terms of means and ends. Values act as filters through which our deliberation is reduced and choices are made.

Values do not in and of themselves determine what is good or what is bad but provide a standard for individuals to decide what is better or best for him or her.

There are two types of values: means and ends. End values are beliefs about the kinds of goals or outcomes that are worth trying to pursue. Means values are beliefs about the types of behaviors that are appropriate for reaching goals. Mean values are often focused on the greater good (social) or personal (self-preservation).

Each person has a unique combination of means and end values that are used constantly to sort experiences and make future choices. It is clear from the explanations and excuses emanating from the mouths of duped investors how they became Madoff victims. Despite a growing suspicion about the high rates of returns, the ends for many of the investors justified the means. For those ends-driven people who also just happened to be less curious and more influenced by people of similar style and interests, the ugly outcome was predictable and inevitable.

Many of the charities on the other hand were blind-sided too by their social-driven means value. They accepted the unrealistic high rates of return as an end to meet their means.

This failure to understand means AND ends obviously has ended badly for many.

Understanding how Madoff concocted his scheme is intellectually challenging but it will do nothing to prevent another travesty unless individuals accept some responsibility to understanding how he or she makes a decision.

February 16, 2009

Hindsight is always 20/20 but lately it seems that a lot of really smart people are making really bad decisions. I just listened to a podcast featuring Sydney Finkelstein, the author of Why Smart Executives Fail.

I've been harping on this concept for years and could swear I wrote an article or newsletter column titled Why Smart Managers Make Dumb Decisions....but maybe I'm having just another one of those senior moments because it's no where in my files.

Regardless, Finklestein ignited a firestorm of ideas for me. He made several relevant points for every leader to consider.

Being a successful leader isn't always about having the highest IQ, graduating from a top business school, or gaining the most experience. It's about having the ability to make the right moves at the right time using all of the above.

What then de-rails really smart people? Neuroscientists have no proven that our brains are genious at pattern recognition. We build on the past to guide us in the future. BUT...and this is BIG. We then quickly react to these patterns based on our emotions. While many of us become really good at relying on our intuition (or "blink" according to Malcolm Gladwell), bad decisions will result if we don't recognize 4 red flags that make smart people stupid.

1. Experience can be misleading. When conditions change, decisions must change too. Finklestein talks about Dick Fuld's extraordinary success at saving Lehman Brothers in the late 1990s. Unfortunately the conditions of the current financial crisis are different and more complex than the one in which he hung gained white-knight status. His past experience was remarkable - but inappropriate when applied to the mess we're in today.

2. Self interest - what more needs to be said! When the sense of entitlement trumps good decision making, bad decisions happens. Just think about the CEOs testifying in front of Congress - what were they thinking? To be fair, self-interest isn't always intentional. It often works at the sub-consious level. But isn't that what Daniel Goleman has been talking about for years - emotional intelligence. Obviously higher EQ might have saved a few of these fallen CEO heroes.

3. Pre-judgment. The natural tendency is to view a situation through the lens of our past experiences. We then make our decision too early and ignore changes in conditions or circumstances. He cites the response (or lack of it) by Homeland Security to Hurricane Katrina. After the storm passed and officials observed neighborhood celebrations, they assumed the worst had past based on their experience in Florida. But Florida didn't have an aging levy system. Pre-judgment blinded smart people into making a very dumb decision.

4. Emotional attachment. We are subconsiously influenced by how we feel about people, places, and things. Take for instance Jerry Yang's refusal to accept Microsoft's bid to purchase his company. Because of his emotional attachment to Yahoo and his personal dislike for Microsoft, he lost over $30 Billion as Yahoo shares plunged afterwards.

The podcast is good. It's worth taking a few minutes to listen to. But when you think about it, all Finklestein is saying that EI (Emotional intelligence) once again trumps IQ and experience when critical decisions must be made.

February 14, 2009

Each year, the Conference Board's CEO Challenge Survey asks hundreds of senior executives from around the world to identify and rate their most pressing concerns. Finding qualified managers, managing talent and planning for succession have been placed on the back burner according to a new CEO survey. Borrowing from the Alan Greenspan's now infamous description of "irrational exuberance," this current state of affairs might be defined by "irrational incompetence" when it comes to managing what these same CEOs used to refer as their companies' most important assets.

The list reveals several key findings - several indicating a serious case of short-sightedness and contradictions:

1. With no control over a turbulent global economy, CEOs are focused on leading their companies’ reaction to it. That's a good thing. They see their most important job as effectively executing strategy in the context of today’s global marketplace chaos. But what boils to the top is this: does that management team that got them into this mean have the capability to get them out? Weren't these same people executing the strategy before? Or were they so focused on execution that they neglected to keep their eyes and ears open to what was going on around them and ahead of them. And that leads me to my second finding.

2. The crisis has led CEOs to focus on “bread and butter” survival issues, while longer-term challenges, especially in talent management, are deemphasized. Talent management can't take a back-seat. It's the engine that will drive the strategy. To execute effectively, these CEOs see speed, flexibility, and adaptability to change as more important than ever; it ascends to 3rd place from 7th. The number who rate speed, flexibility, adaptability to change as being one of their greatest concerns almost doubles.

But unless execution is completely automated, doesn't its effectiveness depend upon the ability of its talent to deal with the complexity, adapt quickly to changes, and recognize and anticipate accurately the outcomes of subtle trends. So how can a business back-burner talent management when its very future is predicated upon having the only the best and brightest find a way out of this mess?

It's apparently easy.

Finding qualified managerial talent, which placed among the Top 10 challenges two years running (2007 and 2008 July/August), fell eight places and out of the Top 10 altogether in the October survey. Only two of 20 people-related challenges rise in ranking: employee efficiency and the cost of employee healthcare benefits—both of which are direct bottom-line contributors. But employee efficiency is related to something I've been harping on for years. When the complexity deepens, the pace quickens, and the future is uncertain, the talent that got a business to where it is may not be the right talent to get it where it wants to go.

The crisis is amplifying a de-emphasis on people issues, potentially worsening what economic conditions had already put into play. In today’s even looser labor market, CEOs appear assured that talent will be there when, how, and if they need it. That's a mistake of apocalyptic proportions.

The crisis has already demonstrated without a doubt that the talent supply to understand, no less lead us out of this mess, is scarce. Current talent loaded with strategies and skills for the past are no match for the current and future needs.

When this crisis is finally defused, the talent pool will be older and still unprepared. The aging workforce is still getting older. The skill gaps will have become wider as funding for training and development has been slashed. Technology will be more advanced requiring different skills. You just can't bookmark talent management and expect in a year or two to go back and pick up where you left off. The quantity of job seekers may be larger but the quality of the talent won’t be.

It just goes to show that all the rhetoric about getting the right people on the bus was just that - rhetoric. The route has been diverted but the same team is driving. While the destination may still be realistic, the path to get there isn't. While hiring and succession planning initiatives may be become secondary to keeping the lights on, the organization will soon run out of gas if current talent isn't up and ready for the journey.

Assessing the capability, potential, and resiliency of the current workforce - and especially senior management - to both weather the storm and anticipate a successful recovery is absolutely necessary.

It is apparent from my daily interactions with managers and employees and the implosion of so many businesses that this short-sightedness is epidemic. This means that many organizations are missing opportunities to better position themselves talent-wise both immediately and when the economy turns around.

February 09, 2009

Health care costs related to obesity are rivaled by productivity costs in their impact. In the U.S. alone it is estimated that obesity is associated with 39 million lost work days; 239 million restricted-activity days; 90 million bed days; and 63 million physician visits per year. Studies have shown that obese workers are absent approximately 1-3 extra days per person, per year, compared with their normal weight counterparts and also that substantial weight loss in obese subjects can result in reduced sick leave.

Productivity costs, defined as the combination of mortality and morbidity costs, are attributed not only to that which an employer pays in productivity losses caused by premature death or health impairments that severely restrict an employee’s ability to work, but also take into account ailments that can interfere even temporarily with an employee’s capacity for production. Sleep apnea, respiratory problems, poor female reproductive health, and depression, conditions that can cause such temporary interference, have been proven to occur at a much higher rate in overweight and obese individuals.

February 05, 2009

Over the past 30 years, employers have seen productivity costs and medical expenses skyrocket alongside the rate of obesity. Today, 66% of the U.S. adult population is overweight, and of those, 31% are obese. As a result, two-thirds of the adult population (and two-thirds of your workforce) are at increased risk for many serious ailments including type 2 diabetes; heart disease; hypertension; osteoarthritis; stroke; gallbladder disease; and endometrial, breast, prostate and colon cancers.

Employers are estimated to spend at least $13B per year on health care costs for obese and overweight employees, who are responsible for an estimated 27% of annual trend in medical premiums paid by private employers. For each unit increase in BMI, direct health care costs increase by 2.3%, and the excess cost of obesity at a 1,000-person organization is about $285,000 per year.

February 04, 2009

As a nation obesity levels have skyrocketed over the last three decades. Today, overweight and obese employees make up over two-thirds of the workforce, costing employers up to $1, 991 per person, per year, in excess medical and productivity costs. By 2020 it is projected that over 70% of Americans will be overweight and over 40% will be obese.

Despite a $40 billion weight loss industry, it is clear that present attempts to curb the obesity epidemic are unsuccessful. The “solutions,” mostly popular diets or unproven over-the-counter dietary supplements, are focused on short-term weight loss goals rather than life-long health and fall short of offering the kind of support individuals need to change their behaviors for the long term. A combination of the genetic predisposition to gain and retain weight and an unsupportive environment where too often the unhealthy choice is the easiest choice has set us up for failure.